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European shares saw a subdued end to what looked to be a fourth week of gains, but the combination of Thursday's surprise dive in inflation to just 0.7% and a revitalised dollar kept it on the ropes.
After its biggest fall in six months in the previous session, the euro fell to $1.3530, on course for a fall over the course of the week of two percent.
"It is clear that there has been a major sentiment change on the euro," said John Hardy, head of FX strategy at Saxo bank in Copenhagen.
"The ECB's single mandate has always been on inflation so this gives Draghi and co further reason to do something at next week's meeting. We see considerable further downside. The likes of euro/dollar back into the old range, down towards $1.30."
The move was amplified as dollar continued to kick away from a recent nine-month low, boosted by upbeat U.S. data overnight.
Stock markets across the continent lost between 0.2 and 0.%, pegged back by signs of third quarter weakness at some major European firms.
At the same time, the return of bets on an ECB rate cut saw euro zone government bonds extend this week's rise.
CHINA REASSURES
Reassuring signals on China's factory activity offered support to Asian markets, though Tokyo's Nikkei finished at a one-week low as the yen strengthened against the euro.
Markets' focus remains heavily on U.S. monetary policy and how soon the Federal Reserve will begin tapering back its $85 billion a month support programme, having delayed a move in September.
U.S. S&P E-mini futures edged up about 0.1%, after the S&P 500 Index closed down about 0.4% on Thursday but still gained 4.5 percent for the month.
The ISM survey of manufacturing for October will give investors the latest temperature reading on the state of the U.S. economy after some upbeat PMI data on Thursday.
"If the ISM report is better than expected, it could add to revived tapering expectations, and U.S. yields and the dollar could go up and stocks could go down," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.
Not all players are convinced that this week's U.S. newsflow heralds a shift in monetary policy expectations, given the disruption caused by last month's Federal shutdown.
"The existence of noise in the October data will likely make it difficult for the Fed to gather enough evidence to start tapering in December," strategists at Barclays wrote.
In commodities trading, gold steadied but at $1,326.01 an ounce was still close to its lowest in nearly two weeks, hurt by sharp losses in the previous session from month-end profit-taking, the strong U.S. economic data and the higher dollar.
Copper got a lift from the China data, rising to $7,281 a tonne and back toward a one-week peak of $7,300 hit on Thursday. Brent crude added 0.3% to $109.19 a barrel as U.S. crude edged up 0.1%t to $96.44.
